Service provided by assessee but service tax paid by service recipient instead of by service provider – Demand of interest and imposition of penalty on service provider for violating Rules

PJ/Case Laws/2011-12/1272

Case: INVINCIBLE SECURITY v/s COMMISSIONER OF C. EX., NOIDA

Citation: 2011 (23) S.T.R. 19 (Tri.-Del.)

Issue:- Service provided by assessee but service tax paid by service recipient instead of by service provider – Demand of interest and imposition of penalty on service provider for violating Rules

Brief Facts:- Appellants were engaged in the business of providing security services which is covered under Service tax net and they are registered under Service Tax Department. They were engaged by M/s. Bharat Sanchar Nigam Ltd., Moradabad for providing security services vide an agreement. The terms and conditions were mutually agreed upon. The BSNL was reluctant to pay service tax on the invoices raised by appellants and instead BSNL started deducting the amount of service tax from the invoices raised by appellants. BSNL kept depositing the said amount of service tax in Punjab National Bank, Moradabad nominated for payment of service tax.

BSNL issued various certificates to the appellants evidencing the fact that service tax on the amount charged by appellant has been deducted and deposited with nominated bank for and on behalf of the appellant. Sample of such certificates were submitted. Copies of TR-6 challans evidencing deposit of service tax by BSNL were also provided to appellant.

Thereafter, the jurisdictional Superintendent raised demand of interest and penalty on late depositing of service tax vide a letter. In this letter, they admitted that service tax was paid. The interest had also been deposited vide a challan.

A show cause notice was issued to appellant on the ground that as per Section 68 of Finance Act, 1994 they were required to pay service tax on service rendered to BSNL which has not been remitted by them to treasury and they did not follow the relevant rules. Demand was confirmed. In appeal before the Commissioner (Appeals), the impugned order was upheld.

Hence, appellant filed further appeal before the Tribunal.

Appellant’s Contention:- Appellant contended that all tax dues and tax dues and interest thereon have been deposited into the treasury by the BSNL and hence there is no further payment due to the Government. Hence all the demands may be set aside.

Reasoning of Judgment:- At the stage of stay application hearing the investigation was ordered which showed that BSNL had deposited service tax. The Tribunal held that as per the submission of the Appellant in this the service tax liability and interest thereon has been discharged, though not by the service provider but by the person who received the service. So there are technical violations of the relevant laws. Since all duties have been remitted into the treasury as per the submissions of the appellant the related demands made in the impugned order would be waived. Further they held that invoking the provisions of Section 80 of the Finance Act, 1994 all penalties imposed in impugned order would also be waived.

However, the Tribunal clearly specified that this order cannot be precedent for the appellant not to comply with the relevant rules for future period. Further, if the interest as applicable is not paid the department can recover it from the appellant after giving him notice and opportunity to provide evidence, if any.

Decision:- Appeal disposed off accordingly.

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PJ/Case Laws/2011-12/1272

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